The figure represents an 11% increase on the 52,939 purchase approvals in December, and a 29% year-on-year increase from January 2011.
The sharp increase has been driven by more loans to borrowers with small deposits, with more first-time buyers being given access to high-loan-to-value (LTV) mortgages by lenders. Since January 2011, high-loan-to-value lending has almost doubled. Loans to borrowers with a deposit of under 15% accounted for only 7% of all loans for house purchase back in January last year, but have risen to account for almost 13%.
This has helped more low income and first time buyers get onto the property ladder, with the number of loans to these borrowers increasing at a faster pace than loans to wealthier borrowers. There were 15,329 loans for purchase of homes costing below £125,000 – typical first time buyers property. This was the highest number since March 2008, and a 31% increase from January last year.
Additionally, there were fewer loans on expensive property in January than in December, as the number of loans for purchase of expensive property fell in all price brackets over £376,000, suggesting wealthier buyers are beginning to represent a less disproportionately large share of the market.
Despite the improvement, deposit requirements are still high by historic standards, which mean first-time buyer numbers remain suppressed compared to their pre-2008 levels. In January 2007, the average deposit for house purchase loans was 31%, compared to 38% in January 2012.
Richard Sexton, director of e.surv, said, “The mortgage market has so far done a reasonable job in repelling the onslaught from the eurozone. LTVs have trended steadily upwards over the past six months, and approvals volumes are holding up well. Lenders pushed out a spate of high loan-to-value mortgages in the summer to cater for the backlogged first time buyer market, and, although they have taken time to feed through, we now are we beginning to see borrowers take them up in notable numbers.”
But it won’t last forever. Despite all the encouraging news surrounding the market at the moment, danger lurks just around the corner. The rate at which banks lend to each other – LIBOR – has been creeping upwards. The banks are yet to pass these extra costs onto the consumer, but this is sure to happen, and will come in the guise of higher mortgage rates. If the situation in the eurozone becomes more tumultuous, which looks possible, lenders will batten down the hatches and scale back the amount they lend to first time buyers.”
“The early months of 2011 were so weak that the year-on-year growth in January is more an indictment on how suppressed lending was a year ago than it is a sign of a vibrant market. First time buyer numbers are still low by historic standards and buy-to-let lending is forming an increasing share of overall lending.”
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